RUSS KOESTERICH: I think the main thing you've seen over the last few months is not a significant improvement in the fundamentals, it's been more the absence of some of the things the market feared.

So if you go back three or six months and you think about the environment, there was still a lot of concern about the Eurozone. There was concern about a hard landing in China. There was a tremendous amount of concern about the fiscal cliff in the United States, this series of tax acts and spending cuts.

What is happening is that most of the things the market was afraid of simply didn't happen and that, coupled with a lot of flows into equities at the start of the year, have been enough to power the markets higher. But I think the short answer to your question is no. Things are not fundamentally different than they were back in October or November.

There is some risk of a pull back, and the reason for that is, again, this rally has gotten a bit ahead of the fundamentals.

ELYSSE MORGAN: Talking about those fears that were in the market, particularly looking to the US, I mean, the fiscal cliff is still there. It hasn't really been dealt with in an entirety. So, looking at the risk to this rally that we're seeing now, when that fiscal cliff problem re-emerges, are we going to see a sell-off?

RUSS KOESTERICH: This is an excellent point. And you raise something that is very important. The fiscal cliff was not an either-or event. It's a series of tax acts and spending cuts, some of which have hit, others of which make it into the coming months. And, most importantly, none of the fundamental drivers of the US's fiscal problems have been dealt with.

So there is some risk as we get into the spring that this could trip up the markets. Probably the next really crucial day to watch is March 27. What happens then is that the resolution that basically funds the US government, that gives all the departments the money they need to operate, is going to expire.

So before March 27th, Congress have to agree on a new funding bill. If that does not happen that is a major risk because effectively what would have to occur would be a partial government shut-down and that would run the risk of pushing the US back into recession.

ELYSSE MORGAN: Do you think it could spark a sell-off?

RUSS KOESTERICH: I think that the risk of it is going to spark some additional volatility. Now I don't think this is going to happen. Similar to the deal in the fiscal cliff, the most likely scenario is some last minute deal which avoids the worse case scenario. But at some point before the end of 2013 we're going to be back having the same conversation.

ELYSSE MORGAN: Looking to Australia's economy now, we've had our Reserve Bank reduce its expectations for GDP back to 2.5 per cent for 2013. Do you think 2.5 per cent is achievable?

RUSS KOESTERICH: I do think it's achievable. You know again, it's funny, when I come to Australia I'm often greeted by a lot of the pessimism, concerns about the strong Australia dollar, concerns about the two speed economy. But I think from many perspectives, Australia looks very sound fundamentally. Much lower debt levels than you see in many of the others, and much more sustainable fiscal and monetary policy.

This to me suggests that there's some room for further stimulus if necessary, and I think 2.5 per cent is achievable. And again, I know that's not great in the context of the last several years, but compared to much of the developed world I think people in the US or certainly Japan or Europe, would be thrilled to see 2.5 per cent growth.

ELYSSE MORGAN: Where do you think China sits in that. The Chinese official figures indicate that it hasn't seen that hard landing that markets feared and that's very much sort of glided into a much lower growth rate of around 8 per cent or a little bit lower. Do you think that those figures are reliable?

RUSS KOESTERICH: I think it is roughly where China is. I mean there's always a question about the reliability of Chinese data, but when you look at some of the numbers like electricity production, imports, they seem to confirm the fact that China has engineered a soft landing. Now to be clear, a soft landing in China in 2013 looks very different than a soft landing in China in 2010 when that was plus 10 per cent growth.

I don't think anybody thinks that's going to happen any time soon. It probably isn't even desirable given how concentrated that growth was in the investment side of the Chinese economy. Instead this 7 to 8 per cent growth looks to be more sustainable.

I think China can achieve that for 2013, and this is good news not only for China, not only for Australia, but also for the global economy. Because in a slow growth world we do need a soft landing in China to keep some momentum going in the global economy.